Question

Solomon Corporation reported the following operating results for two consecutive years:

Required

Compute the percentage changes in Solomon Corporation’s income statement components between the two years. (Negative amounts should be indicated by a minus sign. Round your answers to 1 decimal place. (i.e., .234 should be entered as 23.4).)

SOLOMON CORPORATION
Income Statements
	2018	2017	Percentage Change
Sales	$1,295,000	$1,002,500		%
Cost of goods sold	796,425	601,500
Gross margin	498,575	401,000
Operating expenses	304,500	198,000
Income before taxes	194,075	203,000
Income taxes	61,400	52,800
Net income (loss)	$132,675	$150,200		%

Zachary Company reported the following operating results for two consecutive years: Required Compute each income statement component for each of the two years as a percent of sales. (Percentages may not add exactly due to rounding. Round your answers to 1 decimal place. (i.e., .234 should be entered as 23.4).)
	ZACHARY COMPANY Vertical Analysis of Income Statements 2019 Percentage of Sales 2018 Percentage of Sales Sales $1,002,000 % $1,077,000 % Cost of goods sold 551,100 598,400 Gross margin on sales    450,900 478,600 Operating expenses 129,800 148,400 Income before taxes 321,100 330,200 Income taxes 80,500 80,600 Net income $240,600 % $249,600 %

Selected financial information for Rundle Company for 2019 follows

Sales	$	1,650,000
Cost of goods sold		1,155,000
Merchandise inventory
Beginning of year		160,000
End of year		197,000

Required

Assuming that the merchandise inventory buildup was relatively constant, how many times did the merchandise inventory turn over during 2019? (Round your answer to 2 decimal places.)

Merchandise inventory turnover

times

Answer 1

1
Compute the percentage changes in Solomon Corporation’s income statement components between the two years. (Negative amounts should be indicated by a minus sign. Round your answers to 1 decimal place. (i.e., .234 should be entered as 23.4).
SOLOMON CORPORATION
Income Statements
	2018	2017	Percentage Change
Sales	$1,295,000	$1,002,500	29.2	%
Cost of goods sold	796,425	601,500	32.4	%
Gross margin	498,575	401,000	24.3	%
Operating expenses	304,500	198,000	53.8	%
Income before taxes	194,075	203,000	-4.4	%
Income taxes	61,400	52,800	16.3	%
Net income (loss)	$132,675	$150,200	-11.7	%
Example: 100/1002500*1295000 = 29.2% sales increased in 2018 compared to 2017
Example: 100/601500*796425 = 32.4% cost of sales increased in 2018 compared to 2017
2
ZACHARY COMPANY
Vertical Analysis of Income Statements
	2019	Percentage of Sales	2018	Percentage of Sales
Sales	$1,002,000	100%	$1,077,000	100%
Cost of goods sold	551,100	55%	598,400	56%
Gross margin on sales	450,900	45%	478,600	44%
Operating expenses	129,800	13%	148,400	14%
Income before taxes	321,100	32%	330,200	31%
Income taxes	80,500	8%	80,600	7%
Net income	$240,600	24%	$249,600	23%
Example: 100/1002500*551100= 55%
Example: 100/1077000*598400= 56%

3
Calculations: Average inventory = (160,000+197,000)/2	178500
Inventory turnover = Cost of goods sold / Average inventory = 1,155,000 /178500 = 6.47